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Digital Transformation: the Electricity Sector in France and Germany

Research: Digital Transformation of the Electricity Sector in France and Germany
Published on
18 October 2016

The digitalization of the energy sector translates to the use of ICT technology throughout the value chain. Everything from smart networks to cloud computing, mobile applications or management services is finding its way into the energy sector.

To understand the challenges of this evolution, Grenoble Ecole de Management collaborates with ZEW, a European center for research in Germany. The two organizations carry out a study of French and German energy market experts who work in industry, science and government. Here we provide you with selected excerpts from the 2016 second semester study carried out from May to June.

The digital transformation of the electricity sector

In France, 58 percent of experts believe that the country’s digital transition in the electricity sector is similar to other Western countries. In Germany, the level of digitalization is considered to be adequate or high. Both French and German experts agree that the digital transformation is happening too slowly.

An unfavorable cost-benefit ratio

The study highlights several factors that are slowing the digital transformation in the electricity sector. The primary obstacle cited was an unfavorable cost-benefit ratio. For example, smart grids have been deployed in Issy, Nice, Lyon and Grenoble. Whereas the technology behind these grids is seen favorably, they are generally tested on a small scale and therefore their value is not guaranteed when deployed on a large scale.

Strict regulations

In France, regulatory measures are considered to be the second most important obstacle to the digitalization of the electricity sector. Feedback from technology demonstrators highlights that regulatory measures prevent them from easily turning such technologies into profitable operations.

Cybersecurity: a fundamental issue

Cybersecurity is considered a crucial issue. German experts believe that cyber-threats are a greater obstacle than regulatory measures in terms of the digitalization of the German electricity sector. Cybersecurity and the protection of personal data is a challenge faced by all sectors undergoing a digital transformation. For example, 97% of Fortune 500 companies have been victims of a successful cyber attack.

Embracing change

French experts underlined two more factors that slow down the digital transformation in the electricity sector. First, the semi-competitive nature of the network lessens each company's desire for change. Second, there are issues to overcome surrounding the social acceptation of digital changes such as smart meters. As in other countries, French consumers are worried about the protection of their personal data and the danger of electromagnetic emissions.  

Improving efficiency

While the digital transformation is full of challenges, it also has the potential to optimize our electrical networks. French and German experts agree that gains can be made in several areas, such as: predictions to manage network load, sharing of electricity production and  customer billing.

A positive impact for consumers

French and German experts agree that the digital transformation should benefit consumers. They believe that digitalization will allow the industry to be more flexible (18% of French experts, 19% of German experts). However, less than 11% of French and German experts believe that households will benefit from greater flexibility. This is one of the interesting paradoxes of the digital transformation in the electricity sector.

On one hand, consumer expectations are cited as a motivating factor for the digital transformation. They are asking for more information and control over their energy consumption in order to lower costs and reduce their impact on the environment. On the other hand, there are doubts as to the fact consumers will be able to fully benefit from this digital transformation.

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